Gold prices (XAU/USD) encountered some selling pressure on Tuesday, retreating from the monthly high tested earlier in the day, giving up a portion of the previous session’s 1% gain. The pullback came as the generally positive sentiment in the stock market dampened demand for safe-haven assets such as gold. The decline came as investors repositioned ahead of the upcoming US inflation data, although several factors are expected to provide support to the precious metal, which could limit further declines.
Geopolitical tensions continue to weigh on market sentiment, with investors cautious about the potential for a wider conflict in the Middle East and the ongoing Russia-Ukraine war. These concerns could dampen market optimism. Moreover, expectations of a dovish Fed stance failed to significantly boost the US dollar (USD), supporting non-yielding gold prices. However, a clearer picture of the recent upward momentum requires confirmation by stronger selling pressure.
Most recently, Israel escalated its military activities near Khan Yunis in southern Gaza on Monday, increasing demand for gold as a safe-haven asset. Israel is also preparing for a possible retaliatory strike by Iran and Hezbollah following the assassination of Hamas leader Ismail Haniyeh in Tehran in late July. Meanwhile, Russian President Vladimir Putin promised a major response to Ukraine’s recent cross-border incursion into the Kursk region, further strengthening gold’s safe-haven appeal.
Expectations that the Federal Reserve may cut interest rates by 50 basis points in September continue to support gold. However, upside for XAU/USD remains limited due to positive risk sentiment, with traders taking a cautious stance ahead of key US inflation data releases. The upcoming US Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday are expected to provide fresh insights into the Fed’s policy direction and could set the stage for further gains in gold if inflation shows signs of cooling.
Technical Outlook: Gold on track to retest all-time highs
From a technical perspective, gold’s recent break above the $2,448-2,450 resistance level suggests a bullish outlook, with oscillators on the daily chart gaining positive momentum. This makes it possible for gold to retest its all-time highs in the $2,483-2,484 range and subsequently challenge the psychological barrier of $2,500. A decisive break above this level could pave the way for a continuation of the upward trajectory.
Conversely, the $2,448-2,450 resistance zone now acts as an immediate support. Failure to hold this level could see gold prices fall back to overnight lows of around $2,424-2,423. Further support is seen around the $2,412-2,410 area, with the $2,400 mark acting as a key psychological level. A break below this threshold could expose the 50-day simple moving average (SMA) around $2,376-2,375, which is crucial in maintaining the near-term bullish bias. A sustained break below this could shift momentum in favor of bearish traders, potentially dragging gold prices to late July lows of around $2,353-2,352, coinciding with the 100-day SMA.
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